Key facts
- Brent crude oil prices rose above $95 a barrel, the highest level since early June.
- West Texas Intermediate crude traded near $90 a barrel.
- Hopes for peace negotiations between the US and Iran have diminished.
- Tensions in the Strait of Hormuz and Red Sea threaten oil supply routes.
- US forces conducted strikes on Iranian sites, with President Trump warning of further escalation.
- June inflation in the UK fell to 2.6%, below expectations.
Oil prices have surged back to levels not seen since early June, with Brent crude breaking $95 a barrel amid evaporating hopes for a ceasefire and renewed geopolitical tensions in the Middle East. The rally marks a significant reversal from the price easing observed after a 60-day ceasefire was agreed last month.
West Texas Intermediate crude also saw gains, trading near $90 a barrel. The price increase follows comments from Senator Marco Rubio, who expressed skepticism about Iran's commitment to peace talks. The US Secretary of State accused Iran of seeking control over the vital Strait of Hormuz, a move the US administration deems a violation of international law.
Further pressure on oil prices came from reports of two crude tankers in the Red Sea returning to port due to credible threats from Iran-backed Houthi militias attempting to control the Bab al-Mandeb Strait. Energy analyst David Morrison warned that any permanent closure of this chokepoint could significantly disrupt Saudi oil exports and lead to severe supply shortages.
The US military conducted another round of strikes on Iran, marking 11 consecutive days of offensives aimed at degrading Iran's capacity to threaten commercial shipping. President Donald Trump indicated preparations for a potential attack on an underground nuclear site, signaling a major escalation.
Kathleen Brooks, research director at XTB, noted that the elevated oil prices present a significant challenge for central banks and new governments striving to manage the cost of living. She highlighted that high energy costs could strain household budgets, leading to substantial economic consequences.
Despite the rising oil prices, inflation in the UK fell to 2.6% in June, below analyst expectations. This softer inflation data had previously fueled hopes that the Bank of England might avoid raising interest rates. However, economists suggest that the current economic backdrop of weak growth and a cooling labor market makes further tightening unlikely.